IR35 and supply chain compliance
“always use clearly defined contracts and make a clearly defined Status Determination when engaging contractors from 5th April 2021”
How do we ensure IR35 and supply chain compliance?
It starts with getting the right contracts in place at the outset. We provide you with specialist and overarching Main Client Terms, which cover all relevant issues related to engaging workers that we supply.
The Main Client Terms govern the overall relationship of the parties involved and include high level topics and clauses such as confidentiality, indemnification, obligations, definitions and meanings; all significant and relevant to the Off Payroll Rules and Agency Worker Regulations.
We also provide you with a Client Services Agreement which, together with the Main Terms, provide specific provisions to you such as payment terms, fees and limits on liability.
Both the Main Client terms and the Client Services Agreement work in conjunction with each other and neither should be used in isolation.
Make a Clearly Defined Status Determination
Having received the Main Terms and Client Service Agreement you are ready to hire a Contractor.
The next step is to think about and recognise what you need the contractor for. The questions detailed below will help you in this respect.
It will also help determine the nature of the work and decisions you make in determining any tax risk you may potentially have, from 5th April 2021 when the new ‘Off-Payroll’ rules apply. This is extremely important if you take on Contractors directly or via an agency without the correct terms between you and the Contractor they supply. This is because tax liability can pass up the chain if you (or the agency) have not approached the engagement correctly.
Do not worry about ‘employment status’ of the Contractor or any technical jargon such as Mutuality of Obligation (MOO), Substitution or Direction and Control for now.
(If you really want to know more about the technical stuff there is a lot to consider and quite honestly it’s best left to the employment law specialists, but you have any specific questions just get in touch with us and we will be pleased to help)
Think about what you require, by answering these questions:
- Do you require the Contractor to do a specific job or project for a specific purpose or outcome?
- Will the Contractor be in charge of completing that job, rather than just carrying out additional temporary work or tasks for a set period?
- Will the Contractor have autonomy in completing the job or project, in that you can trust the Contractor to compete the work or project correctly?
- Will you want the Contactor to do other work from time to time that is different to the specific job or project?
- Do you anticipate the Contractor to require assistance such as what to do or how to do their work from you or any line manager?
If you have answered questions 1, 2 and 3 with an unequivocal ‘YES’ and questions 4 and 5 with an unequivocal ‘NO’ then we will issue the correct Project Agreements to you and the Contractor which will correctly capture a project outside of IR35. The two Project Agreements work back-to-back and seamlessly, ensuring there isn’t any conflict between the two which could result in liability. In this situation we will the pay the Contractors’ PSC Gross (without deduction of tax).
If you have answered the above questions any differently, we are able to supply a Contractor for you and we will pay the individual net of deductions.
In this situation (which is inside of IR35) we issue the individual contract worker with a ‘Temporary Candidate Agreement’ which covers the engagement of the candidate on a contract for services to carry out the assignment. This also meets the requirements of the Conduct of Employment Agencies and Employment Business Regulations 2003 (often referred to as “Conduct Regulations”).
When we supply Contractors for you using our specialist terms, alongside a suitable Status Determination, we will always take full responsibility in paying the contractor correctly. This is made with any relevant tax deducted so that you do not have any tax liability when using Contractors supplied by us.
Our experience stems from a thorough understanding of the Off-Payroll legislation and our widely used IR35 friendly contracts, which accurately record arrangements where there is no deemed employment.
To discuss your interim or contract hiring needs or have any issues relating to IR35 off-payroll legislation please contact us.